R v Ward (HM Inspector of Taxes); R v Special Commissioner, ex parte Stipplechoice Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 18 March 1988 |
| Date | 18 March 1988 |
| Court | Crown Court |
Queen's Bench Division (Crown Office List).
Mr. Leolin Price Q.C. (instructed by Gregory, Rowcliffe & Co., agents for T.P.D. Taylor, Mobberley) for the company.
Mr. Alan Moses (instructed by the Solicitor of Inland Revenue) for the Crown.
Before: Nolan J.
The following cases were referred to in the judgment:
C.H.W. (Huddersfield) Ltd. v. I.R. Commrs. WLR[1963] 1 W.L.R. 767
R. v. General Commrs. (Brentford Division), ex parte Chan & Ors.TAX[1986] BTC 50
R. v. Special Commr., ex parte Napier TAX[1987] BTC 512
This was an application for judicial review by the taxpayer company seeking a declaration that it was entitled to reasonable notice of an alteration to an assessment under appeal and an order of certiorari to quash the determination of a Special Commissioner.
The taxpayer company was not represented at the hearing of an appeal against an assessment to corporation tax before a Special Commissioner because the shares in the company had been sold and neither the new nor the former shareholders would consent to bear the cost of representation. The assessment which was the subject of the appeal was specified to be for an accounting period from 1 February to 25 October 1977.
At the hearing, the inspector of taxes asked for and was granted an adjournment during which he made further inquiries and interviewed one of the former shareholders.
The company was informed that it might be represented at the resumed hearing but was not informed that the inspector had altered the terminal date of the accounting period for which the assessment was made, to 31 January 1978, or that the shareholder had been interviewed.
The Commissioner dismissed the appeal, confirming the assessment in the sum of £672,187.
The importance of the revision to the company was that, had the assessment been confirmed for the accounting period originally specified, to 25 October 1977, the tax payable could have been claimed by the company from the former shareholders under an indemnity contained in the sale agreement. The indemnity only extended, however, to tax payable for accounting periods ending on or before 31 December 1977. The revised accounting period to 31 January 1978 therefore fell outside the scope of the indemnity.
The company applied for judicial review seeking a declaration that it was entitled to reasonable notice of the revision of the end of the accounting period and that by failing to give such notice the inspector had acted ultra vires, and an order of certiorari quashing the determination of the Special Commissioner.
Held, granting an order of certiorari quashing the Commissioner's determination:
1. It was axiomatic that a taxpayer must know the nature of the assessment which was being made on him. If the nature of the assessment changed, the taxpayer must be informed of the change and of the reasons why it was made before the assessment could be confirmed on appeal.
2. Although the indemnity had no bearing on the tax liabilities of the company, it was a factor which the inspector could not properly leave out of account in deciding whether to notify the company of the revised period to give it an opportunity to be heard in relation to the revised accounting period.
The taxpayer company applied for judicial review in respect of:
(2) the failure of the tax inspector to give due notice to the company of the revision by him of an accounting period for corporation tax underIncome and Corporation Taxes Act 1970 section 247 subsec-or-para (8)sec. 247(8) of the Income and Corporation Taxes Act 1970;
(3) the determination of a Special Commissioner on 27 January 1987 of an appeal against a corporation tax assessment.
The company sought the following relief:
(2) a declaration that the company was entitled to reasonable notice of the revision by the tax inspector of the end of an accounting period for corporation tax purposes from 25 October 1977 to 31 January 1978 and that by failing to give such notice the tax inspector had acted ultra vires;
(3) an order of certiorari to remove into Queen's Bench Division of the High Court and to quash the determinations of the Special Commissioner;
(4) further or alternatively, a declaration that the determination was ultra vires.
The grounds on which relief was sought were:
-
(a) As to relief sought under (1):
(i) It is implicit in Income and Corporation Taxes Act 1970 section 247 subsec-or-para (8)sec. 247(8) of the Income and Corporation Taxes Act 1970 that if, on further facts coming to the knowledge of a tax inspector, he sees fit to revise an accounting period he should give notice of that revision to the taxpayer.
(ii) By notice of appeal dated 18 April 1984 the company had appealed to the Special Commissioner against an assessment to corporation tax for the period 1 February 1977 to 25 October 1977.
(iii) The appeal meeting before the Special Commissioner opened on 5 January 1987. The company did not attend for reasons set out in a letter to the clerk to the Special Commissioner dated 30 December 1986. The meeting continued until 7 January 1987 when it was adjourned to 27 January 1987, and the company was informed of this fact by letter dated 9 January 1987 from the clerk to the Special Commissioner.
(iv) By letter to the company dated 26 January 1987 the inspector of taxes stated that on new facts coming to his knowledge he saw fit to revise the accounting period of the company to 1 February 1977 to 31 January 1978. The letter was received on 28 January 1987.
(v) The revision of accounting date rendered irrelevant the company's reason for not attending the appeal meeting and gave rise to issues not relevant to the accounting period with which the appeal was originally concerned.
(vi) In any event the inspector's letter did not give reasonable or any notice of the revision and in the event deprived the company of its opportunity to put its case at the adjourned appeal meeting.
(b) As to the relief sought under (2):
(i) The Special Commissioner on the revision being brought to his notice ought not to have resumed the appeal meeting until the company had been given the opportunity of being heard in relation to the revised accounting period.
(ii) Further or alternatively the revision required the appeal to be recommenced, with due notice to the company, which the Special Commissioner failed to do.
Nolan J.: By this motion Stipplechoice Ltd. ("Stipplechoice") seeks a declaration to the effect that Mr. John Christopher Ward, one of Her Majesty's Inspectors of Taxes, wrongly failed to give Stipplechoice due notice of the revision by him, on 26 January 1987, of an accounting period in respect of which Stipplechoice had been assessed to corporation tax. Stipplechoice also seeks an order of certiorari to quash the decision of Mr. Brian O'Brien, one of the Special Commissioners of income tax, on 27 January 1987, confirming the corporation tax assessment for the revised period.
Stipplechoice was not represented before Mr. O'Brien at the hearing on 27 January 1987 when he confirmed that assessment, and the broad ground upon which Stipplechoice makes the complaint against Mr. Ward and Mr. O'Brien is that Stipplechoice has suffered a denial of natural justice through Mr. Ward's failure to notify it of the revision to the accounting period and through Mr. O'Brien's acceptance of that revision without giving Stipplechoice an opportunity to oppose it.
The importance of the revision, according to Stipplechoice, lies in the fact that had the assessment been confirmed for the accounting period originally specified in it - that is a period running from 1 February to 25 October 1977 - the tax payable could have been claimed by Stipplechoice from its former shareholders under the terms of an indemnity contained in a share sale agreement dated 31 December 1977. The indemnity only extended, however, to tax payable for accounting periods ending on or before that same 31 December. The revised accounting period ran from 1 February 1977 to 31 January 1978, and so fell outside the scope of the indemnity.
The share sale agreement formed part of a tax avoidance scheme. The first object of the scheme was that Stipplechoice should avoid corporation tax on a trading profit in excess of £700,000 which it received by the sale on 25 October 1977 of a property, Meadowbank, which it had developed. The second object was to prevent any part of that profit from being apportioned for income tax purposes underFinance Act 1972 schedule 16Sch. 16 to the Finance Act 1972 to such of the former members of Stipplechoice as were individuals, and to enable them to enjoy it in the form of a capital gain on the value of their shares. The first of these objects was to be achieved by Stipplechoice buying 60 annuities for a total price of £875,000 in January 1978 but bringing them into the accounts for the period 1 February...
To continue reading
Request your trial
-
Kelsall (Inspector of Taxes) v Stipplechoice Ltd
...Ltd (1986) 59 TC 396;TAX[1986] BTC 388 R v Ward (HMIT); R v Special Commr, ex parte Stipplechoice LtdTAXTAX(1988) 61 TC 391; [1988] BTC 209 Corporation tax - Assessment - Accounting period - closing date of accounting period revised by inspector - Whether dates of accounting period appeared......
-
Manisty and Another as Trustees of the EA Manisty FURBS Trust
...TAX[1984] BTC 119Scorer v Olin Energy Systems Ltd TAX[1985] BTC 181R v Ward; R v Special Commissioners, ex parte Stipplechoice Ltd TAX[1988] BTC 209Luxmoore-May v Messenger May Baverstock[1990] 1 WLR 1009 (CA)Hentrich v France(1994) 18 EHRR 440Glaxo Group Ltd v IR Commrs TAX[1996] BTC 59Arm......